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At Detroit Bankruptcy Trial, EM Says Offer to Creditors Wasn't Take It or Leave It

October 30, 2013

Emergency Manager Kevyn Orr’s restructuring plan was not a take-it-or-leave-it offer to creditors, he testified Monday during the city’s bankruptcy eligibility trial.

Orr made the statement during a stretch of testimony aimed at proving the city negotiated in good faith with creditors, particularly in unveiling a June proposal for creditors, including bondholders, retirees and unions.

“Did you tell the audience it was not negotiable?” the city’s bankruptcy lawyer Greg Shumaker asked Orr.

“No,” Orr said while recounting a meeting with creditors at Detroit Metropolitan Airport on June 14.

In May, Orr wrote a report to let residents know about the finances in clear terms. Its key quote: “This path is not sustainable.”

Orr said the depths of Detroit’s financial crisis was “somewhat shocking” to learn after his appointment in March.

Orr recounted his earliest days in office and his efforts to unravel the city’s financial condition.

He learned that in 2011, the city’s total liabilities were $12 billion. That figure grew to $14 billion a year later.

“Between my appointment and within a few weeks, the liability was $4 billion larger, about $18.5 billion total,” Orr testified Monday.

“Do you recall your general reaction upon learning about the cash and liabilities and revenue?” the city’s bankruptcy lawyer Greg Shumaker asked during direct examination.

“I knew things were bad but it was somewhat shocking how dire it was,” Orr said. “Within a few weeks of coming on board, I was informed several of our employees had checks bounce. The cash flow was so tight.”

He was asked about the city’s claim that it is insolvent — a key requirement for Chapter 9 bankruptcy relief.

“No one on a serious basis has ever disputed me that the city is insolvent,” Orr said.

He also testified about the city’s shoddy services, including blight and lights — or lack thereof — and said the goal is to provide a “C-plus” level of service for residents.

Orr’s early testimony Monday focused on how the city’s financial crisis has left services, including emergency medical responses, ranking at the bottom of major cities nationwide.